Credibility of Sustainability Reports: The Contribution of Audit Committees

Business Strategy and the Environment (2018, Forthcoming)

36 Pages Posted: 2 Feb 2018  

Habiba Al-Shaer

Newcastle University Business School

Mahbub Zaman

Hull University Business School

Date Written: January 25, 2018

Abstract

Concerns about the credibility of sustainability reports can be mitigated through assurance. Although audit committee remit encompasses monitoring of sustainability issues, there are potential complementary and substitution between governance mechanisms. This paper explores the relationship between audit committees and sustainability reporting assurance using resource dependency theory. We find audit committee characteristics have an impact, additional to that of the board of directors and the existence of sustainability committees, on voluntary sustainability assurance. Our results also show that audit committee independence is associated with use of a Big 4 audit firm for sustainability assurance. A negative association between sustainability committees and assurance however indicates assurance could be a burden for small firms. Overall, the findings suggest audit committees add credibility and help improve sustainability reporting through their independence, expertise, and oversight.

Keywords: audit committees, assurance, corporate governance, sustainability, stakeholder

Suggested Citation

Al-Shaer, Habiba and Zaman, Mahbub, Credibility of Sustainability Reports: The Contribution of Audit Committees (January 25, 2018). Business Strategy and the Environment (2018, Forthcoming). Available at SSRN: https://ssrn.com/abstract=3109295

Habiba Al-Shaer

Newcastle University Business School ( email )

Department of Accounting and Finance
5 Barrack Road
Newcastle, NE1 4SE
United Kingdom

Mahbub Zaman (Contact Author)

Hull University Business School ( email )

Hull, HU6 7RX
United Kingdom

HOME PAGE: http://www.mahbubzaman.com

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